The Service Value Chain framework presented in the previous paragraphs pres-ents the core of the value-oriented services marketing approach that is depicted in Figure 1.7. Simultaneously, this concept is the basis for the structure of the book. In this chapter, we have outlined and explained the foundations of the framework, identifying the challenges of services marketing, the process charac-ter of services, as well as the framework itself. In Chapcharac-ter 2, we specify the idea of the Service Value Chain by looking more deeply into the value creation process.
We will illustrate in detail how the processes of a firm affect the value creation. By doing so, we will have provided the basics to understanding the specific contri-butions of the different service processes on value in subsequent chapters.
In Part 2 we focus on the primary value processes and elaborate on provider activities within these processes. To do so we deal with the interaction process, i.e. the customer integration, the service production itself as well as service recov-ery in Chapter 3. In Chapter 4, the relationship process of a service provider is outlined, namely the activities required to recruit customers, keep customers as well as expand relationships and regain customers.
Parts 3 and 4 concentrate on the secondary value processes of services market-ing. Part 3 deals with the service value and explains how it is defined for a specific service firm, delivered and communicated. Part 4 looks at the service resources, more specifically at human and tangible resources (including technol-ogy). In addition, capacity management activities that aim at the optimal provision and utilisation of service resources will be discussed.
Finally, Part 5 links value-oriented services marketing and its environment inter-nally and exterinter-nally to the service corporation. Exterinter-nally, services marketing not only manages the relationships with the customers, but also the delivery to market in general as well as the relationships with other relevant market players, e.g. sup-pliers and competitors. In Chapter 11, the impact of concepts such as international services marketing, service networks and outsourcing on the value processes is explained. Internally, services marketing interacts with other parts of the organisa-tion. Chapter 12 deals with the implementation and control of services marketing.
The learning objectives of Chapter 1 can be summarised thus (see Figure 1.8):
1. Service industries are characterised by highly competitive market situations that complicate service providers’ efforts to gain and keep customers who use the services and eventually create value for the service firm. Therefore, ser-vice companies try to focus their business processes on value creation, by
Summary
Service capacity management (Chapter 10) Customer acquisitionCustomer retentionCustomer recovery
Relationship process (Chapter 4) Customer integrationService productionService recovery
Interaction process (Chapter 3)
Primary proc esses
(Part 2) Service resources (Chapter 9)
Secondary pr oces
ses
Communicating service value (Chapter 8)
Defining service valueDelivering service value (Chapter 7) Service price (Chapter 6)Service concept (Chapter 5)
Managing service
resour ces
(Part 4)
Creating service value
(Part 3)
Services marketing implementation and controlling (Chapter 12)
Services marketing strategy (Chapter 11)
Internal and e xternal servic
es marketing envir onment
(Part 5)
Value orientation of service firms (Chapter 1) Value creation by service firms (Chapter 2)Basic concept (Part 1) FIGURE 1.7Framework of value-oriented services marketing and outline of the book
designing and conducting marketing activities that help to generate value by attracting and keeping customers and by inducing revenues that contribute to the firm’s value.
2. In accordance with the development of services marketing in practice, a simi-lar tendency towards value orientation can be observed in services marketing research. During the last 40 years, research in this field focused mainly on services marketing concepts, service quality and service production. More recently value-oriented research topics are at the core of research efforts.
Studies on service value perceived by customers, customer value and equity that contribute to the firm’s value and on value creation by services market-ing processes dominate the current services marketmarket-ing research.
3. How a firm’s activities contribute to value creation is determined by the nature of services. Services differ from consumer goods according to various service-specific characteristics. Services are intangible and perishable, they cannot be transported and are produced and consumed simultaneously. Furthermore, services are heterogeneous and are co-produced by the customer.
4. All these factors can be summarised under the notion that services are processes. In contrast to consumer goods, the value for the customer is not created via a material good, but within a process. In that process, the service provider affects the customer, who takes part in the service production process and therefore is also called the ’external factor’.
5. These characteristics have an important impact on the nature of value-creating processes of service firms. The concept of the Service Value Chain structures these processes and illustrates the value impact of services marketing activities.
6. The primary processes of the Service Value Chain aim at managing customer interactions and customer relationships. Managing customer interactions results in the service process where the internal factors of the service provider and the customers as external factors meet. The business processes regarding customer interactions aim at integrating the customer into the service process, delivering the service and recovering the service in case of service failures.
This interaction process is characterised by the customer ‘throughput’ via the interactions with the firm.
7. On the more aggregated level of the customer relationship, there is a cus-tomer ‘throughput’ not only through the interactions with the firm but also through the relationship with a firm. A customer relationship is initiated, maintained, expanded and recovered in case of customer defections. These relationship processes contribute to a firm’s value by ensuring revenues that have their origin in customer relationships.
8. The two primary processes, i.e. the relationship and the interaction process, are influenced by the secondary processes of a service provider. These second-ary processes principally concern the service value that is defined by the
service concept and the service price, that is delivered by the distribution sys-tems of the service firm and that is communicated by branding and communication efforts.
9. A second group of secondary processes concerns the service resources.
Service employees, tangibles and technologies facilitate customer interactions and relationships. The optimal level of these resources in terms of value con-tribution is defined and realised by a service firm’s capacity management.
10. This basic idea of the Service Value Chain is the core of value-oriented services marketing that helps in managing the value creating processes of a service firm.
(1) Service firms concentrate on value creating marketing activities due to high competition.
(2) Services marketing research focuses on perceived service value, customer and equity as well as value processes.
All about value
Learning Topic
(3) Services have specific characteristics that make them different from consumer goods.
(4) In service production, value is created in a process in that the customer himself plays an important role as the ‘external factor’.
Services are processes
(5) The Service Value Chain structures value creating processes of service firms.
(6) A first category of primary processes concerns the customer’s ‘throughout’ through interactions with the service provider.
(7) A second type of secondary processes concerns the customer’s ‘throughput’ through relationships.
(8) A first group of secondary value processes defines, delivers and communicates service value.
(9) A second group of secondary value processes helps in managing service resources.
Service Value Chain
(10) Based on the value chain concept, process-oriented services marketing manages value creating activities of a service firm.
Value-oriented services marketing
FIGURE 1.8 Learning summary for Chapter 1
1. What are the reasons for the value orientation of services marketing in many service industries?
2. Describe the developmental stages of research in services marketing.
3. What are the specific characteristics of services that make them different from consumer goods?
4. What is meant by a service company’s focus on value creation?
5. Explain the concept of ‘customer throughput’ within the Service Value Chain concept.
6. What primary value processes are conducted by service firms and how do they contribute to the firm’s value?
7. What secondary value processes can be distinguished and how do they affect the primary value processes and thus value?
1. Try to recap your monthly expenditure and identify the proportion of services in your budget. What percentage do services constitute in your total budget?
Compare this percentage with the economic statistics and discuss the reasons for the difference.
2. Do some research on a certain industry (e.g. banking, insurance, hotel,
restaurant, education, public transportation, airline) and find out what are the current challenges in these industries. Discuss how these challenges can be addressed by the Service Value Chain concept.
3. Choose a particular service (e.g. banking, insurance, hotel, restaurant, university, public transportation, airline) and explain how the specific characteristics of services apply to that service.
4. Think of one of your recent service utilisations and explain the process character of this service usage. What situations do you remember that illustrate the specific characteristics of services?
5. Discuss the concept of customer ‘throughput’ through the interaction and relationship process. Try to illustrate the concept with a practical example from your own experience.